You bet your life: Tips for buying life insurance

It’s face it: Life insurance isn’t the most fun subject to dwell on at length or think about during your time away from work.

In fact, most of us don’t want to think about this subject at all. According to the Insurance Information Institute, one-third of all U.S. families with a new baby at home don’t update their life insurance coverage.

As unpalatable as the idea of planning for your own death might seem, there are plenty of reasons to look into buying life insurance now – even if you already have a policy.

For one thing, having the right kind of coverage can give you incredible peace of mind. Another detail to consider: Prices have been dropping significantly. The Insurance Information Institute notes that premiums have plummeted 50 percent for standard-risk term insurance since 1994, and they’re expected to drop by another 4 percent this year.

Honestly, how often do you hear about rates dropping for anything these days? The following tips can help you secure good coverage without spending too much.

1. Figure out your needs. You can use online calculators to get a rough idea of how much money it would take to cover your surviving spouse’s expenses until retirement, and/or your children’s expenses until they reach adulthood or finish college. The Life and Health Insurance Foundation for Education offers this calculator. MSN Money offers this one as well.

2. Opt for term life. A term-life policy is the best and simplest option for most Americans ranging in age from about 20 to about 50. Cash-value life insurance can make sense for wealthy people over the age of 60 – but for most people, term insurance is the way to go.

3. Get quotes online. Web sites such as Accuquote.com, FindMyInsurance.com, LifeInsure.com and InsWeb can give you plenty of pricing information fast – although all of it will be subject to a more detailed application process and a medical exam.

4. Get in shape. To improve your risk class, you can take steps such as quitting smoking, losing weight and reducing your cholesterol and blood pressure if they’re high. You also can get that exam before you apply for insurance so you’re not hit with any surprises. In some cases, the changes you make can save you tens of thousands of dollars over the life of a policy.

5. Decide how to buy. You can go it alone and buy insurance directly from the company, seek guidance from a fee-only financial planner, buy it through a commission-based financial planner, or buy it through an insurance agent.

6. Understand how these folks get paid. Insurance agents and commission-only financial planners don’t make money unless they sell you insurance products. Fee-plus-commission (or fee-based) planners charge both a fee and a commission on products. Fee-only planners charge a fee for their guidance but don’t sell products; you would buy the insurance coverage on your own.

7. Do your homework. Whether you decide to buy a policy on your own or hire a professional to help you, you should bone up on life insurance on the sites mentioned in Tip No. 3. This will help you feel more confident and informed.

8. Buy from a financially strong company. The insurance company should have an “A” rating or higher from rating agencies such as A.M. Best, Standard & Poor’s, Duff & Phelps, Weiss, Moody’s and Fitch Ratings.

9. Be alert for red flags. Avoid advisers who say they’re more knowledgeable about the insurance company than the rating agencies, or who claim the ratings are unimportant or unavailable. If you have a complaint, contact the adviser’s customer service department and speak up. You also can file a complaint with your state’s insurance department or attorney general’s office. To start the process of finding the correct contact information for your state,

10. Make adjustments as needed. Your life insurance needs will change over the years – most notably when you marry, divorce, have a child or start caring for an aging parent. At a certain point – once your kids are all grown up, and once you know you’ve saved enough for retirement – you can decide to stop paying for life insurance entirely.